Kelly Tractor & Equipment, Longview, Texas, earns Rural Lifestyle Dealer’s 2015 award for single-store dealerships. From left to right is: Craig Maitland, Michael Fuller, Christy Burkhalter, Charles Hoofman, Robin Alston, Marsha Fuller, Mike Kelly, Terrence Nelson, Anthony Leachman, Josh Miller and Micah Jenkins. Gerardo Mercado is shown in the inset photo. Employees not pictured are Joe Rocha and Stephan White.

“We were likely to have starved to death,” says Mike Kelly, recalling his first year owning a farm equipment dealership. It was 1985, in the midst of the farm crisis. It was a time when more dealers were getting out of the business than were getting into it.

He was still working at a thriving John Deere construction equipment dealership in Longview, Texas, where he managed its service operations. During his 10 years with Allen Machinery Co., it had grown into a 3-store dealership covering 29 counties in northeast Texas. In 1983, the owner crossed swords with John Deere brass and “they didn’t want him as a dealer anymore and they bagged and tagged him,” says Kelly.

When the owner, Sidney Allen, dissolved the business, he paid off the employees who were vested in the company’s retirement program. “None of us had put anything into the plan,” says Kelly. “Sidney had covered it all and now he was handing me the largest check I had ever seen in my life.”

The dealership was being sold and Allen called his 12 managers together and asked, “Who’s going to stay and who wants to partner with me in a new business?”

Kelly says he was the only one who raised his hand to be a partner with Allen. After working around Ford Tractor’s demand that the partners have $500,000 unencumbered available, Kelly says the man from Ford Credit “reaches over and tears off a piece of paper and writes a number down. He told us, ‘There’s your number. Go to work.’”

What the judges say…

“With just 15 employees, they are not what we would consider a large rural lifestyle dealer, but still managed to generate $685,511 sales dollars per employee …

The dealership saw $4 million in growth in sales over the previous year …

Kelly Tractor & Equipment has developed a very sound succession plan and has good community involvement.”

Having received his “magical Ford credit account number” on Jan. 31, he was allowed to open Kelly Ford Tractor on Feb. 1, 1986. “We had a blank building. We didn’t have a desk, we didn’t have a phone system, we didn’t have an air compressor, we didn’t have a workbench, we didn’t have a parts counter. We didn’t have anything. We started off with me, one guy in the shop, one guy in parts and a bookkeeper,” says Kelly.

And it was too late that year to place an ad in the yellow pages to tell potential customers they were in business. The next edition wouldn’t come out until the following December. In the interim, Kelly traveled around the area and every time he saw a blue tractor, he would put his card in the mailbox of the operator.

The following December, all four employees at the dealership took a pay cut. “The yellow pages came out around Dec. 20 and it was like somebody unlocked the door of the dealership,” says Kelly. (Related Video: Turning Around a Struggling Dealership) “People told me they were looking for us and didn’t know where we went. That next year we sold 28 tractors and started to see some light.”

Kelly Tractor

Founded: 1985

Locations: 1

Employees: 15 (3 sales; 7 service; 3 parts; 2 administration)

Major Lines: New Holland, Mahindra

Shortlines: Bush Hog, Bad Boy Mowers, Kuhn, Top Hat Trailers

2014 Revenue: $10,282,668 ($8,221,541 new wholegoods; $326,150 used wholegoods; $1,349,746 parts; $384,430 service)

3-Year Sales Growth Figures:

2012: $8,071,463

2013: $6,839,968

2014: $10,282,668

2014 Return on Assets: 6%

By 2014, that light shined really bright for Kelly Tractor & Equipment as the dealership sold 206 Mahindra and 47 New Holland tractors, as well as 132 Bad Boy zero-turn mowers. “That was the best year we’ve ever had,” Kelly says. “That is our benchmark year.”

With a jump of nearly $3.5 million from 2013, Kelly Tractor’s revenues in 2014 approached $11 million for the year, or $685,500 per employee. This and other performance factors led Rural Lifestyle Dealer’s panel of judges to believe that it was indeed an outstanding year for the dealership. As a result, they named Kelly Tractor & Equipment the 2015 Single-Store Dealership of the Year.

Markets in Transition

The market for heavy equipment in east Texas has shifted dramatically over the decades that span Kelly’s experience as an equipment dealer. In the 1970s, dealers thrived on the oil and gas boom. Now, with the coal and gas market, there is some coal mining, according to Craig Maitland, sales manager for Kelly Tractor. “Southeast of Longview, we have coal mines. What happens is they buy up their base property in this area, strip the coal out and reclaim all this land. There are more trees in east Texas now than there ever was before they started mining because that’s how they replenish the ground when they’re done mining. Today everything is being put back into mainly pines with some hardwood.”

As far as pure agriculture, there used to be cotton and cattle. “But there’s no real crops in east Texas any more,” says Kelly.

Up until about 2011, it wasn’t unusual to see ranchers with 1,500 or 2,000 head of cattle, he says. And while cattle have been a bellwether around Longview for decades, they’re not nearly as prominent in the region as they had been even a few years ago.

“When it got dry, just about everybody sold out and left the business,” says Maitland. “A lot of them thought they could buy back in when things got better, but it hasn’t happened. The amount of cattle in east Texas right now is so dramatically diminished it’s unreal.”

More Than ‘Simply Selling’

Since taking on the Mahindra brand in 2009, Kelly Tractor & Equipment in Longview, Texas, has become one of Mahindra’s premiere dealers.

According to Cleo Franklin, vice president of marketing and strategic planning Mahindra USA, receiving Rural Lifestyle Dealer’s 2015 Dealership of the Year award for single-store dealerships is a testament to Kelly Tractor’s commitment and focus on investing in its people, community engagement and never wavering customer satisfaction philosophies.

“The Kelly Tractor team embraces the importance of establishing long-term relationships with their customers as their focus goes far beyond simply selling, to supporting customers after the sale. We owe our success to a dealer network that passionately reflects the values of the Mahindra brand and who embrace the Rise philosophy: Accepting No Limits, Alternative Thinking and Driving Positive Change. Mike Kelly exemplifies these traits in all he does,” says Franklin.

He says some of the cattle people hung in there and are still buying and selling calves, but he doubts it will ever get back to the levels that were prevalent in the past.

Kelly and Maitland estimate that 60% of their customer base today is comprised of homeowners with acreage. Nearly all of the rest are construction contractors and municipalities. “A very small percentage of our customers are farmers and ranchers, because there are just very few left. The customer landscape has changed” says Maitland.

The dealership has also experienced growth with hunters and outdoors enthusiasts. “A lot of folks down here have a deer lease where they lease property from landowners so they can hunt,” says Maitland. “They put food plots in and roads in and out to their camps. Everybody wants a tractor to do it. They’ll spend $25,000 on this tractor and that’s just about all they’ll use it for.”

Game-Changing Decisions

Along with the changing market came the need for the dealership to transform itself to meet the needs of the new customers, which meant adding new equipment lines, and, just as importantly, new ways of reaching out to these new customers.

With the changing demographics, tractors in the 40-50 horsepower range became Kelly’s best sellers. It was the difficulty in getting enough utility tractors in this range that led the dealership to take a hard look at picking up another tractor line.

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Kelly Tractor & Equipment credits much of its success to adding Mahindra tractors and Bad Boy mowers to its lineup in 2009, along with innovative marketing that includes television ads. The ads consistently push equipment packages that include a tractor, loader, cutter, disc and a trailer (left), which also turned out to be a good move, according to owner Mike Kelly.

In 2009, they started looking around. “As much as we wanted to stay true blue, I don’t know what we would have done if we had kept the status quo,” says Kelly. “That was a tough decision to make. Craig and I talked about it and brought Josh [Miller, salesperson] into the conversation. I told them, ‘We can’t continue to do what we’re doing just with the blue line. We’ve got to look at another line.’ It really came down to deciding that we’re in business to stay in business and not to just survive. We’re in business to make money, so how are we going to do that?”

During the dealership’s research into other tractors, Kelly says they found that most manufacturers are pushing the wrong things. “The manufacturers always want to sell on features. It’s got the best this and that and has everything on it. Customers would like to have it, but they can’t afford it. They want a good tractor that will go forward, back up, turn left and right, and the 3-point lift works. They want a good functional tractor. For a lot of them, it’s the first tractor they’ve ever bought and they want something that’s robust and will do the job.”

Their search ultimately led them to choose Mahindra. “We picked it up to fill in the gaps that New Holland couldn’t supply,” says Kelly. He tried to keep the blue tractors the most prominent on the lot, but ultimately customers’ interest grew in the Mahindra line.

After 6 or 7 months, Kelly noticed that more and more customers would look at the Mahindras first. “They weren’t even sure how to pronounce the name, but they’d say give me a price on that red one. The 4025 model was a no-frills tractor and only had 2-wheel drive, but with a loader it could pick up almost anything.”

Kelly says at some point Mahindra asked them what else they needed. “So we told them. We need a 4025 4WD but don’t change the transmission. We need power steering on it and big fat balloon R4 tires, and we want a loader that will work great with this tractor. The tractor and loader should sell for under $20,000. Don’t bring it out here and tell us it’s going to sell for $25,000 because it won’t sell. If you get it to us for under $20,000, we can sell it.”

In January of this year, Kelly Tractor had nearly 50 of the units they asked Mahindra to develop sitting on its lot. “We ran out of 4025s on the last weekend of May, they’re gone. I wish we had 150 more of them, but we just can’t get that model at that price,” says Kelly.

Dealer Takeaways

  • Be willing to take a risk to get your dealership to the next level. However, make sure you have the product lines and expertise to carry you through.
  • There is no one way to advertise successfully. Be open to trying new ideas, including showing off a “personality” for your dealership.
  • Radically changing markets doesn’t have to mean declining revenues. Identify what equipment your new segments need and stock plentifully.
  • Set a schedule to monitor the financial metrics that give you the most insight into your dealership’s performance.

Almost by happenstance, the dealership also picked up another zero-turn mower line that’s turned out to be a big hit with its customers. While the dealership already had a zero-turn line that was producing satisfactory results, selling between 15-18 units in a good year, a cold call from a manufacturer’s rep gave them a reason to check out Bad Boy mowers.

Kelly says it was 2009 and he overheard a guy in Maitland’s office pitching him on a new mower line. “He looked up at me and I told him, ‘I don’t want another mower line, but go ahead and look at what he’s got. I’ll give you 5 minutes.’ It wasn’t but 3-4 minutes and he’s back saying, ‘You need to look at this. We can sell this unit for less than what we’re paying now for our zero turn and it’s a good looking unit.’”

While Kelly wasn’t quite sold on the unit, the rep left it at the dealership for a few days. During that time, the shop checked it out and found it was easy to work on, so they parked it in the back. The following day one of Kelly’s good customers came in looking for a zero turn for his wife and the orange Bad Boy got his attention. Kelly explained it was only a demo unit and he didn’t even have a price yet. The customer told him, “You’re my dealer. Call somebody and find out what it’s going to sell for.”

He returned the next day with his wife and Kelly told him the price was $8,695. The dealership delivered the new unit to them later that afternoon. Kelly Tractor signed on to be a dealer shortly thereafter. They sold 25 Bad Boys the first year and in its best year since then with the new zero turn, they moved between 135-140 units.